The Local Economy

Northcliffe hit back, pointing out the report was flawed and based on data that was 18 months old, taken when the sites were still in their infancy, which didn’t reflect the subsequent growth and engagement levels on the sites.

It’s interesting to note, however, that Northcliffe has apparently decided to turn Local People into a franchising opportunity, inviting people to licence the rights to the platform for £7K a year rather than hiring community journalists themselves to run the sites.

It’s an interesting approach to hyperlocal - offering the technical infrastructure and training to potential community managers - yet also a risky one, requiring a substantial outlay with little guarantee of success in a market full of potential rivals who don’t have that kind of financial handicap.

But it’s also hard to see how such a model benefits anyone - with that kind of outlay, franchisees would have to be either wealthy enough to take a hit, or forced to push commercial considerations over providing news for the community..

Newsgathering - proper newsgathering, as opposed to shoveling off fluffy press releases - is an expensive business, be it in costs of money or time. The argument that corporate hyperlocal providers have employed, over supposedly amateur platforms, is that they can afford to bring in dedicated, experienced journalists and resource them to provide a proper news service to communities.

Real grassroots engagement with a community through provision of news - an area which national media often fails to connect with, and which regional and local media has had to scale back on as revenues decline - is an area ripe for development.

And this traditional recruitment of community producers, managers or producers to manage a site or group of sites and encourage is an approach seen everywhere from AOL’s multi-million dollar Patch service to the Guardian’s failed local experiment.

But such a model brings with it a substantial cost in itself. AOL’s estimated to be losing around $40m a quarter on its 800-plus network of hyperlocal community sites across the US.

The kind of financial outlay required to sustain and resource three community journalists and their sites apparently proved too daunting for the loss-making Guardian - despite heavy investment in a new US portal - and it was canned in April of this year.

Instead, the company is trialing a community notice board service, called N0tice, which the anti-print brigade are already hailing as the death of local newspapers. Currently only in private beta, the site aims to offer user generated and curated news, events listings and commercial offers to visitors, who can vote on it’s relevance to bring it higher up the noticeboard.

The site looks to generate revenue from allowing premium listings, rather than the traditional ad sales model which failed on Guardian Local. Unfortunately the beta nature of it means a lot of those areas, particularly in Scotland, are a bit sparsely populated just now - including, surprisingly, in Edinburgh, upon which much of the country’s hyperlocal focus has descended.

And curiously, although a Guardian venture, the project currently carries a distinct lack of obvious branding tying it to the parent title - perhaps attempting to head off any further criticism over Guardian Local’s closure and to distance itself from the whole corporate hyperlocal debate.

Patch, of course, is the biggie in the market - a venture into which AOL has sunk a huge amount of cash to try and capture both local news AND the local ads revenue market.

The project remains under pressure to show signs of turning a profit by the end of this year - with potentially huge ramifications for AOL’s already battered stock and reputation if it fails to do so.

The scale of Patch is hugely ambitious, with freelance writers (although budgets for that are, according to some reports, being cut) and a target of launching 1000 sites across the USA by the end of the year.

Critics claim the venture is , but one thing is clear throughout the debates over the costs and merits of the venture: nobody is doubting the hard work in developing the editorial side by the community journalists involved. The levels of engagement and news publishing across the sites varies, but is rarely less than impressive.

In many ways Patch encapsulates the dilemma surrounding corporate level hyperlocal site launches. It's easy to recruit the best local community activists, journalists and bloggers when you've cash floating about and the will to invest. But that community level of engagement is unlikely to bring in major advertising or commercial deals - traffic figures will never be huge on an individual site basis, and smaller local firms are unlikely to have the online ad budgets to make up the shortfall. Yet it exposes the brand to an audience who perhaps wouldn't have used it, or have strayed from it in recent years - as AOL has found.

Here in Scotland, of course, the nearest equivalent is STV Local, currently gearing up to launch its Glasgow portal to sit alongside the existing services in Lanarkshire, Edinburgh and the North East.

The platforms have a bigger role, however - in theory generating leads and content . Unlike AOL, or the Guardian, or Northcliffe, they have a key advantage in STV being a well known brand across the country and having a substantial platform - the channel 3 franchise - to promote the service, though beyond a couple of trails and news stories when sites launch, there’s been little obvious cross-promotion from broadcast.

Currently it claims 300,000 uniques across the country - which you would expect to grow even further with the launch in Glasgow, even allowing for the city’s poor online uptake. Rollout in the city will prove an interesting challenge for the Local project – which has just hired Daily Record digital editor Iain Pope - as, with so much of the country’s media being based there, news from the city gets as much coverage in the nationals as in local media.

With STV preparing to enter renegotiations ahead of 2014 franchise renewals, it doesn’t do the company any harm whatsoever to be seen to be entering the realm of local public service content provision. As such the ongoing costs of STV Local - which, while nowhere near those of Patch, will still represent a significant salary cost to the broadcaster - remains a good investment.

And perhaps that’s the biggest lesson to be learned from corporate-scale hyperlocal. The economics of generating revenue online is a precarious balancing act for news providers at the best of times, but the cost associated with launching and staffing a substantial suite of community sites - as AOL has found - is large and ongoing.

But rather than trying to compete for the local pound or dollar against existing sites, the best use for them is a gateway - a brand extension which allows big name companies to get into the grassroots of digital in a way they couldn’t normally.

It seems unlikely that corporations could ever truly recoup the investment of launching dozens of local platforms - short of the Northcliffe model of franchising them - but can a value be put on that engagement with the audience?